Medicare Sustainable Growth Rate
Encyclopedia
The Medicare Sustainable Growth Rate (SGR) is a method currently used by the Centers for Medicare and Medicaid Services
(CMS) in the United States to control spending by Medicare
on physician services. Enacted by the Balanced Budget Act of 1997
to amend Section 1848(f) of the Social Security Act, the SGR replaced the Medicare Volume Performance Standard (MVPS), which was the previous method that CMS used in an attempt to control costs. Generally, this is a method to ensure that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in GDP. Every year, the CMS sends a report to the Medicare Payment Advisory Commission
, which advises the U.S. Congress
on the previous year's total expenditures and the target expenditures. The report also includes a conversion factor that will change the payments for physician services for the next year in order to match the target SGR. If the expenditures for the previous year exceeded the target expenditures, then the conversion factor will decrease payments for the next year. If the expenditures were less than expected, the conversion factor would increase the payments to physicians for the next year. On March 1 of each year, the physician fee schedule is updated accordingly. The implementation of the physician fee schedule update to meet the target SGR can be suspended or adjusted by Congress, as has been done regularly in the past (a doc fix). The estimated SGR for 2010 is -8.8%, and the conversion factor for the physician fee schedule is -21.3%. On December 16, 2010, President Obama signed the Medicare and Medicaid Extenders Act of 2010
into law, delaying the implementation of the SGR until January 1, 2012. The implementation of the conversion factor had previously been delayed until December 1, 2010. Physician groups, including the American Medical Association
, lobby for a permanent reform to the SGR so that physician payment rates are not subject to annual cuts (a permanent doc fix).
Prior to the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act
(MMA), the SGR was calculated using a single year's real GDP per capita. Since the MMA was enacted in 2003, the SGR is calculated using a 10-year annual average growth in real GDP per capita.
The MEI measures the weighted average price change for various inputs involved with producing physicians’ services. The UAF compares actual and target expenditures, and is determined by a formula that includes the target and actual expenditures and the SGR. By law, the UAF can not exceed -7.0%.
(MIEA-TRHCA) provided a 1-year update of 0% for the conversion factor for CY 2007 and specified that the conversion factor for CY 2008 must be computed as if the 1-year update had never applied. Section 101 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) provided a 6-month increase of 0.5% in the CY 2008 conversion factor, from January 1, 2008, through June 30, 2008, and specified that the conversion factor for the remaining portion of 2008 and the conversion factor s for CY 2009 and subsequent years must be computed as if the 6-month increase had never applied. Section 131 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) extended the increase in the CY 2008 conversion factor that was applicable for the first half of the year to the entire year, provided for a 1.1% increase to the CY 2009 conversion factor, and specified that the conversion factors for CY 2010 and subsequent years must be computed as if the increases had never applied.
(BBRA) changed the calculation from fiscal year (FY) to calendar year (CY). The table on the right is a list of the actual yearly MEI and physician fee update conversion factor. The physician update reflects a weighted average for FY 1991-1993 when there were two different updates (one for surgery and one for other services), and for FY 1994 through FY 1997 when there were three different updates (for surgery, primary care, and other services). The Balanced Budget Act of 1997 consolidated service-specific updates so that starting in FY 1998, primary care, surgical, and nonsurgical services were updated by the same rate.
prevented a 25% decrease in Medicare reimbursements from taking effect on January 1, 2011, and further extended the delay until January 1, 2012.
Based on data from community oncology practices across the nation, the Community Oncology Alliance
(COA) estimates that the implementation of the 2010 conversion factor will result in a staggering 38% annual average reduction in Medicare reimbursement
for chemotherapy infusion services alone. The COA estimated the likely impact of the Medicare cuts on actual reimbursement using a financial analytical tool it developed based on the data provided in the proposed CMS rule. Detailed data from nearly 200,000 patient visits was submitted to a certified public accountant that aggregated the results.
Additional data from COA shows that, on average, current Medicare payments to community oncologists cover only 55% of the costs of services associated with the delivery of cancer care. Data was obtained through COA’s “Components of Care” study, a survey of oncology practices across the nation that quantified the clinical and operational components and associated costs for delivering cancer care.
Centers for Medicare and Medicaid Services
The Centers for Medicare & Medicaid Services , previously known as the Health Care Financing Administration , is a federal agency within the United States Department of Health and Human Services that administers the Medicare program and works in partnership with state governments to administer...
(CMS) in the United States to control spending by Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...
on physician services. Enacted by the Balanced Budget Act of 1997
Balanced Budget Act of 1997
The Balanced Budget Act of 1997, , was signed into law on August 5, 1997. It was an omnibus legislative package enacted using the budget reconciliation process and designed to balance the federal budget by 2002....
to amend Section 1848(f) of the Social Security Act, the SGR replaced the Medicare Volume Performance Standard (MVPS), which was the previous method that CMS used in an attempt to control costs. Generally, this is a method to ensure that the yearly increase in the expense per Medicare beneficiary does not exceed the growth in GDP. Every year, the CMS sends a report to the Medicare Payment Advisory Commission
Medicare Payment Advisory Commission
The Medicare Payment Advisory Commission is an independent US federal body. MedPAC was established by the Balanced Budget Act of 1997 . Its primary role is to advise the US Congress on issues affecting the administration of the Medicare program...
, which advises the U.S. Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
on the previous year's total expenditures and the target expenditures. The report also includes a conversion factor that will change the payments for physician services for the next year in order to match the target SGR. If the expenditures for the previous year exceeded the target expenditures, then the conversion factor will decrease payments for the next year. If the expenditures were less than expected, the conversion factor would increase the payments to physicians for the next year. On March 1 of each year, the physician fee schedule is updated accordingly. The implementation of the physician fee schedule update to meet the target SGR can be suspended or adjusted by Congress, as has been done regularly in the past (a doc fix). The estimated SGR for 2010 is -8.8%, and the conversion factor for the physician fee schedule is -21.3%. On December 16, 2010, President Obama signed the Medicare and Medicaid Extenders Act of 2010
Medicare and Medicaid Extenders Act of 2010
The Medicare and Medicaid Extenders Act of 2010 is a federal law of the United States, enacted in 2010. The law was first introduced into the House as H.R. 4994 on April 13, 2010 by Rep. John Lewis with 20 cosponsors...
into law, delaying the implementation of the SGR until January 1, 2012. The implementation of the conversion factor had previously been delayed until December 1, 2010. Physician groups, including the American Medical Association
American Medical Association
The American Medical Association , founded in 1847 and incorporated in 1897, is the largest association of medical doctors and medical students in the United States.-Scope and operations:...
, lobby for a permanent reform to the SGR so that physician payment rates are not subject to annual cuts (a permanent doc fix).
Formula
Section 1848(f)2 of the Social Security Act specifies the formula for calculating the SGR. There are four factors used in calculating the SGR:- The estimated percentage change in fees for physicians’ services.
- The estimated percentage change in the average number of Medicare fee-for-service beneficiaries.
- The estimated 10-year average annual percentage change in real GDP per capita.
- The estimated percentage change in expenditures due to changes in law or regulations.
Prior to the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act
Medicare Prescription Drug, Improvement, and Modernization Act
The Medicare Prescription Drug, Improvement, and Modernization Act is a federal law of the United States, enacted in 2003. It produced the largest overhaul of Medicare in the public health program's 38-year history.The MMA was signed by President George W...
(MMA), the SGR was calculated using a single year's real GDP per capita. Since the MMA was enacted in 2003, the SGR is calculated using a 10-year annual average growth in real GDP per capita.
Conversion factor
In order to meet the target SGR for the next calendar year, the physician fee schedule is updated accordingly. The update is calculated using two factors:- One plus the Medicare Economic Index (MEI)
- One plus the Update Adjustment Factor (UAF)
The MEI measures the weighted average price change for various inputs involved with producing physicians’ services. The UAF compares actual and target expenditures, and is determined by a formula that includes the target and actual expenditures and the SGR. By law, the UAF can not exceed -7.0%.
Past adjustments
Section 101 of the Tax Relief and Health Care Act of 2006Tax Relief and Health Care Act of 2006
The Tax Relief and Health Care Act of 2006 , includes a package of tax extenders, provisions affecting health savings accounts and other provisions in the United States.-Extenders:...
(MIEA-TRHCA) provided a 1-year update of 0% for the conversion factor for CY 2007 and specified that the conversion factor for CY 2008 must be computed as if the 1-year update had never applied. Section 101 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) provided a 6-month increase of 0.5% in the CY 2008 conversion factor, from January 1, 2008, through June 30, 2008, and specified that the conversion factor for the remaining portion of 2008 and the conversion factor s for CY 2009 and subsequent years must be computed as if the 6-month increase had never applied. Section 131 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) extended the increase in the CY 2008 conversion factor that was applicable for the first half of the year to the entire year, provided for a 1.1% increase to the CY 2009 conversion factor, and specified that the conversion factors for CY 2010 and subsequent years must be computed as if the increases had never applied.
Previous MVPS/SGRs and Conversion factors
The table on the left is a table of past years' SGR. Prior to the MMA, the MVPS was in use instead of the SGR. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 is a federal law of the United States, enacted in 1999. The BBRA was first introduced into the House as H.R. 3075 on October 14, 1999 by Rep. William M. Thomas with 75 cosponsors...
(BBRA) changed the calculation from fiscal year (FY) to calendar year (CY). The table on the right is a list of the actual yearly MEI and physician fee update conversion factor. The physician update reflects a weighted average for FY 1991-1993 when there were two different updates (one for surgery and one for other services), and for FY 1994 through FY 1997 when there were three different updates (for surgery, primary care, and other services). The Balanced Budget Act of 1997 consolidated service-specific updates so that starting in FY 1998, primary care, surgical, and nonsurgical services were updated by the same rate.
| Year | MVPS/SGR |
|---|---|
| FY 1990 | 9.1% |
| FY 1991 | 7.3% |
| FY 1992 | 10.0% |
| FY 1993 | 10.0% |
| FY 1994 | 9.4% |
| FY 1995 | 7.5% |
| FY 1996 | 1.8% |
| FY 1997 | |
| FY 1998 | 3.2% |
| FY 1999 | 4.2% |
| FY 2000 | 6.9% |
| CY 2000 | 7.3% |
| CY 2001 | 4.5% |
| CY 2002 | 8.3% |
| CY 2003 | 7.3% |
| CY 2004 | 6.6% |
| CY 2005 | 4.2% |
| CY 2006 | 1.5% |
| CY 2007 | 3.5% |
| CY 2008 | 4.5% |
| Year | Physician MEI Increase | Physician Update |
|---|---|---|
| 1992 | 3.2% | 1.9% |
| 1993 | 2.7% | 1.4% |
| 1994 | 2.3% | 7.0% |
| 1995 | 2.1% | 7.5% |
| 1996 | 2.0% | 0.8% |
| 1997 | 2.0% | 0.6% |
| 1998 | 2.2% | 2.3% |
| 1999 | 2.3% | 2.3% |
| 2000 | 2.4% | 5.5% |
| 2001 | 2.1% | 5.0% |
| 2002 | 2.6% | −4.8% |
| 2003 | 3.0% | 1.7% |
| 2004 | 2.9% | 1.5% |
| 2005 | 3.1% | 1.5% |
| 2006 | 2.8% | 0.2% |
| 2007 | 2.1% | 0.0% |
| 2008 | 1.8% | 0.5% |
| 2009 | 1.6% | 1.1% |
| 2010 | 1.2% | −21.3% |
Impact of 2010 SGR
On March 3, 2010, Congress delayed the enforcement of the conversion factor until April 1, 2010. On April 15, 2010, Congress voted to again delay the implementation and extended the 2009 rate to June 1, 2010. On June 25, 2010, President Obama signed legislation that not only delayed implementation of the conversion factor until December 1, 2010 but also increased reimbursements by 2.2%. The 2.2% increase was retroactive to June 1, 2010, and expired on November 30, 2010. The Medicare and Medicaid Extenders Act of 2010Medicare and Medicaid Extenders Act of 2010
The Medicare and Medicaid Extenders Act of 2010 is a federal law of the United States, enacted in 2010. The law was first introduced into the House as H.R. 4994 on April 13, 2010 by Rep. John Lewis with 20 cosponsors...
prevented a 25% decrease in Medicare reimbursements from taking effect on January 1, 2011, and further extended the delay until January 1, 2012.
Based on data from community oncology practices across the nation, the Community Oncology Alliance
Community Oncology Alliance
The Community Oncology Alliance is a non-profit organization in the United States that advocates for cancer patients and their providers in the community oncology setting, where 84 percent of Americans with cancer are treated...
(COA) estimates that the implementation of the 2010 conversion factor will result in a staggering 38% annual average reduction in Medicare reimbursement
Reimbursement
Reimbursement is the act of compensating someone for an expense . Often, a person is reimbursed for out-of-pocket expenses when the person incurs those expenses through employment or in an account of carrying out the duties for another party or member....
for chemotherapy infusion services alone. The COA estimated the likely impact of the Medicare cuts on actual reimbursement using a financial analytical tool it developed based on the data provided in the proposed CMS rule. Detailed data from nearly 200,000 patient visits was submitted to a certified public accountant that aggregated the results.
Additional data from COA shows that, on average, current Medicare payments to community oncologists cover only 55% of the costs of services associated with the delivery of cancer care. Data was obtained through COA’s “Components of Care” study, a survey of oncology practices across the nation that quantified the clinical and operational components and associated costs for delivering cancer care.